December gets off to a strong start

Dow jumps 106 points; gold ends above $500

By

MarkCotton

NEW YORK (MarketWatch) -- U.S. stocks closed sharply higher Thursday as a raft of inflation-friendly data sparked a rally in technology shares and handed the Dow Jones Industrial Average its first triple-digit gain in more than a month.

Metals prices also kept up their bullish pace, and gold closed above $500, a feat not seen since 1987.

The Dow
DJIA, -1.35%
rose 106.70 points, or 1%, to 10,912.57, its first gain of more than 100 points since Oct. 28.

The Nasdaq Composite Index
$COMPQ
climbed 34.35 points, or 1.5%, to 2,267.17. The tech-rich index put in its best one-day performance in six weeks.

The S&P 500 Index
SPX, -1.42%
tacked on 15.19 points to close at 1,264.67.

"You seem to be getting this period where growth is coming through, but it isn't aggravating inflation and thereby long-bond yields," said Jim Paulsen, chief investment officer at Wells Capital Management. "For the stock market, there's not a lot that can be better than that."

Among components of the Dow, McDonald's
MCD, -2.06%
rallied to a 5 1/2-year high of $35.38 as investors bet that higher personal incomes and consumer spending will bode well for the fast-food giant. See full story.

Alcoa
AA, -1.84%
climbed as much as 3.2% to $28.28 amid a broad rally in metals.

Intel
INTC, -0.66%
rose 1.9% to $27.18 after analysts at Bear Stearns said the company likely will raise its fourth-quarter revenue outlook when it provides a midquarter update on Dec. 8. That helped semiconductor stocks
SOX, -1.95%
put in their best one-day gain in nearly 10 months, surging more than 4%. See full story.

Not all was happy within the Dow component stocks. Wal-Mart
WMT, -1.93%
fell as much as 2.1% to $47.53 after the discount retailer said it expects December same-store sales in the range of 2% to 4%, which is a narrower forecast range than its November target of 3% to 5% same-store sales growth. See full story.

On the broader market for equities, advancers outpaced decliners by more than three to one on the New York Stock Exchange and by more than two to one on the Nasdaq.

Volume was heavy with 1.86 billion shares traded on the Big Board, while 1.52 billion were exchanged on the Nasdaq.

On a historical basis, investors can look forward to further gains in December after a solid performance in November.

On average, the Dow industrials has gained 1.8% in December since 1950, according to the Stock Trader's Almanac. The Nasdaq Composite has risen 2.1% while the S&P 500 has gained 1.7%.

Inflation-friendly data

Stocks got a boost from data showing a modest increase in U.S. personal incomes and spending in October while inflationary pressures eased.

Personal incomes increased 0.4% in October as expected, after rising 1.7% in September, the Commerce Department said. Real (inflation-adjusted) spending increased 0.1% in October, the first increase in three months. Consumer prices rose 0.1% in October after soaring 0.9% in September. See full story.

Also, first-time claims for state unemployment benefits fell sharply in the latest week, the Labor Department reported. The number of initial claims fell 17,000 to 320,000 in the week ended November 26. The decline was larger than forecast. Economists had expected claims to fall to 323,000, according to a survey conducted by MarketWatch. See full story.

The nation's manufacturing sector continued to expand in November, but at a slower pace than in October. The Institute for Supply Management's manufacturing index fell to 58.1% from 59.1% in October. Economists polled by MarketWatch had been expecting the index to fall to 57.8%. The data also offered some good news for those investors worried about inflation. The price index, a component of the ISM report, fell sharply.

Spending on U.S. construction projects rose a stronger-than-expected 0.7% in October as public-sector outlays jumped, the Commerce Department. See full story.

Metals rally

Gold futures climbed to an 18-year high above $500 for the first time in 18 years in New York trading; silver prices closed at their loftiest level since 1987 and copper rose to new heights for the fourth-day in a row.

"The strength in the metals sector is now undeniable as gold crosses key technical barriers and approaches levels it hasn't seen in decades," said commodities trader Kevin Kerr, who also edits Global Resources Trade, a newsletter service of MarketWatch, the publisher of this report.

"The demand is real and at these levels of pricing, we expect to see a sustained rise in 2006," Kerr said.

Gold for December rose $7.90 to close at $502.50 an ounce on the New York Mercantile Exchange. See Metals Stocks.

Dollar, bonds, oil

On the currency markets, the dollar held its own against the euro even after the European Central Bank raised short-term interest by a quarter percentage point to 2.25%, the first increase in five years. The decision was widely expected. See full story.

At last check, the euro was down 0.8% at $1.1708. Against the Japanese yen, the greenback climbed to a more than two-year high, up 0.7% to 120.50 yen. See Currencies.

On the bond market, long-term Treasury prices slumped for a third day as fixed-income traders switched attention from bond-friendly inflation readings to forecasts that November's employment report will show a strong month for job creation when it is released Friday. The benchmark 10-year note was down 9/32 at 99 26/32, with its yield at 4.53% vs. 4.49% on Wednesday. See Bond Report

Crude futures rose on government data showing the first significant decline in heating fuel inventories for the season.

The benchmark January contract ended up $1.15, or 2%, at $58.47 a barrel in New York trading. See Futures Movers .

More declines in auto sales

The auto sector came into focus as carmakers released their U.S. vehicle sales for November.

Ford Motor shares
F, -1.26%
were off 3 cents at $8.10 after it reported a 15% decline in November sales. Car sales fell 7% while truck sales slumped 18%.

DaimlerChrysler
DCX
saw a smaller 3% decline in U.S. sales. The stock was up 69 cents at $50.98.

Japanese carmakers turned in mixed results Toyota Motor Corp
TM, -1.59%
posted a 4.5% rise in November, besting its U.S. rivals. Nissan North America, however, saw its sales tumble 7.8%. Read more

Retailers in focus

Consumers were bargain shoppers last month, shifting much spending to retailers like Wal-Mart Stores and J.C. Penney
JCP, -0.96%
that offered the deepest discounts and the most aggressive marketing devices. See full story.

Wal-Mart
WMT, -1.93%
shares were down on its December outlook but its November same-stores growth of 4.3% was in line with expectations. Same-store sales, a common measure of retail performance, logs sales from stores open at least a year.

J.C. Penney
JCP, -0.96%
shares gained, with same-store sales up 3.6%, nearly double the 1.9% expectation. The stock closed out the session up 4.6% at $54.87.

Pier 1 Imports
PIR, -3.16%
warned of a third-quarter loss, although the home-furnishings retailer posted a 1.9% rise November same-store sales on improving traffic and an increase in the average sale to customers. The stock tumbled 8.5% to $11.62.

There was mixed news out of the Gap Inc.
GPS, +1.54%
The apparel giant saw a 4% decline in same-store sales as traffic remained "challenging" at its Gap and Banana Republic chains. The company said traffic trends improved at its Old Navy stores. The stock ended up 2 cents at $17.40.

Elsewhere, Dow Chemical Co. shares
DOW, -0.61%
fell as much as 2.2% to $44.24 after Lehman Bros. downgraded the company to equal-weight from overweight, citing lower expectations for its ethylene and propylene businesses in 2006. The stock finally trimmed losses to end down 34 cents at $44.91. See Ratings Game

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.